Theresa May greets Donald Tusk at 10 Downing Street in London in September © AFP

The prospects of Britain leaving the EU without a trade deal escalated on Tuesday after Brussels warned stalled Brexit talks could pass a point of no return in December and the UK Treasury drew up plans for emergency spending in case a pact is not agreed.

Donald Tusk, European Council president, said he hoped enough progress could be made by the end of the year to allow the start of talks on a future trade relationship between the UK and EU, but warned that negotiations could not limp on indefinitely.

“If it turns out that the talks continue at a slow pace, and that ‘sufficient progress’ hasn’t been reached, then — together with our UK friends — we will have to think about where we are heading,” he said.

In a sign of the growing tensions between London and Brussels, Theresa May, the British prime minister, was unable to give an assurance to an EU citizen who had lived in Britain for 31 years on her future status, if there was no reciprocal deal over citizen’s rights.

Mrs May told an LBC radio phone-in that long-term EU residents would not be asked to leave, but added: “The arrangements that we have laid out [for EU citizen rights] are dealing with people staying once we have a deal.”

Meanwhile Mrs May, who voted Remain in the 2016 EU referendum, refused to say whether she would vote for Brexit now. She said: “What I did last time was I looked at everything and came to a judgment. And I would do exactly the same this time round.”

Philip Hammond, the British chancellor, has been criticised by anonymous pro-Brexit cabinet colleagues for failing to fund contingency plans in the event Britain leaves the EU without a trade deal in March 2019.

But the Treasury said on Wednesday that £412m had already been allocated to government departments to prepare for Brexit, and that more money would be made available from already tight public finances if negotiations faltered.

“Progress in the negotiations will affect the amounts departments require and when they require it,” the Treasury told the Financial Times. A breakdown of talks in December would increase pressure on Mr Hammond to start preparing for the worst.

The £412m announced in last year’s Autumn Statement was earmarked for the Department of International Trade, the Department of Exiting the EU and the Foreign Office to cover the costs of delivering Brexit in this parliament.

But so far there has been little spent on hiring the thousands of new customs officials and regulators needed if Britain has a clean break from the EU in 2019, let alone new IT systems and real estate such as new customs clearing facilities.

Agriculture, immigration and customs are among the areas which will need substantial immediate investment ahead of a “no deal” Brexit, which would require Britain to set up some new regulatory and administrative systems from scratch.

Mr Hammond is the cabinet’s leading advocate of a “soft Brexit” and wants Britain to retain close links to the European single market, but he is also under pressure to prepare for an outcome he believes would be economically disastrous.

The Treasury said “adjustments to public spending can be made throughout the year”, but Mr Hammond’s Budget next month would be a formal opportunity to set out more details of contingency planning.

Some Eurosceptic Conservatives fear the Brexit talks — which this week entered their fifth round — are going nowhere. “Either we get clarity about the final trade deal or we might as well get on with it,” said Tory MP Bernard Jenkin.

Mr Tusk acknowledged the UK appeared to be preparing for no deal, but insisted the EU was “not working on such a scenario”. He said the EU was negotiating “in good faith” and was still hoping that a deal to move on to the next phase of trade talks “will be possible by December”.

As technical discussions continued between EU and UK officials, the chief negotiators met for a more informal lunch on Tuesday, hosted by David Davis at the UK ambassador’s residence in Brussels.

Michel Barnier, the EU’s chief negotiator, described it as a “constructive” discussion. But Mr Barnier expressed some of his frustration with the state of talks when asked about Mrs May’s contention “the ball” was in the EU’s court. “Brexit is not a game,” he said.

Officials briefed on the discussion said they were frank and genuinely constructive, but did not bring any concrete advances.

Discussions among the EU’s remaining 27 members over the need for no-deal preparations have stepped up recently, with some European diplomats alarmed at the “incomprehensible” political situation in Westminster.

Although contingency planning would primarily be a national responsibility, the European Commission was asked in the summer by some countries to informally look at what measures would be necessary to mitigate the harm from a cliff edge.

Informal work on this has intensified in recent weeks. Mr Barnier’s team have recently begun meeting with national customs authorities, for instance, to take stock of preparedness for all outcomes.

MEPs have also been preparing to amend legislation relating to the EU’s carbon market to ensure a sudden, no-deal exit by the UK does not lead to a crash in prices.

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